DY. COMMISSIONER OF INCOME TAX, BAREILLY vs. SHRI RAJESH SINGH YADAV, BAREILLY

This is an appeal filed by the Revenue against the order of learned CIT(A), dated 28/05/2015 pertaining to assessment year 2012-2013. The revised grounds of appeal, including fresh grounds of appeal, filed by the Revenue, are reproduced as under:

REVISED GROUNDS OF APPEAL ALONGWITH NEW GROUNDS OF APPEAL

“1. That the order of the Commissioner of Income Tax (Appeals) is erroneous in law and on facts in deleting the addition of Rs.84,40,000/-, rightly made by the Assessing Officer on account of unsecured loans under section 68 of the Income Tax Act, 1961 under the income from other sources.

Fresh Grounds of appeal

6. That the Ld. CIT (A) has erred in law while admitting the application of the assessee under rule 46A of the IT Rules for admission of additional evidence.

7. That the Ld. CIT (A) has failed to appreciate that the assessee was given various opportunities to file the said evidences which were availed of in the assessment proceeding and the order was passed under section 144.”

2. Learned D. R., at the outset, submitted that assessment in this case was completed u/s 144 of the Act and Assessing Officer has made additions on account of unexplained unsecured loans amounting to Rs.84,40,000/- and further addition on account of unexplained sundry creditors to the tune of Rs.10,14,987/- was made and the Assessing Officer has also made an addition of Rs.1,58,60,000/- on account of unexplained investment. Learned D. R. in this respect invited our attention to the copy of assessment order and also invited our attention to the findings of the Assessing Officer in this regard. It was submitted that before learned CIT(A), the assessee filed certain additional documents which the learned CIT(A) has wrongly admitted as the assessee was given various opportunities which were not availed of by the assessee and therefore, learned CIT(A) should not have admitted the additional evidences. As regards the merits of the additions, Learned D. R. submitted that since the assessee had not explained the unsecured loans as well as unexplained investment and therefore, the Assessing Officer had rightly made the additions. It was further submitted that during remand proceedings also, the Assessing Officer has held that due to low income level of the lenders, the creditworthiness of the lenders was not proved and therefore, the addition was rightly made u/s 68 of the Act but the learned CIT(A) has deleted the additions without considering the findings of the Assessing Officer and therefore, it was prayed that the order of learned CIT(A) be set aside and that of the Assessing Officer be upheld.

3. Learned counsel for the assessee, on the other hand, submitted that Assessing Officer has completed the assessment u/s 144 of the Act. However, during assessment proceedings the assessee had filed most of the evidences and in this respect our attention was invited to page 3 of the CIT(A)’s order where the learned CIT(A) has mentioned that he had examined the assessment records of the assessee and the contention of the assessee, that most of the evidences were already filed with the Assessing Officer, was found to be correct. It was submitted that during the course of assessment proceedings, the assessee produced various evidences through the ledger of credits and other extracts from the books of account but books of account could not be produced before the Assessing Officer as the computer system of the assessee, on which the books of account had been maintained, had become infected with the virus and there was complete technical snag and that is why the complete data could not be filed during the assessment proceedings but part details, as and when extracted, were produced before the Assessing Officer and therefore, the application under Rule 46A of the I.T. Rules was filed with the learned CIT(A) and all the remaining evidences were filed before him and learned CIT(A) remanded these evidences to the Assessing Officer for his comments. It was submitted that during remand proceedings, though the Assessing Officer had raised certain reservations regarding creditworthiness of certain lenders but learned CIT(A), in a detailed order, has discussed the creditworthiness of all the lenders and, after discussion, has allowed relief to the assessee. Learned counsel for the assessee further argued that similarly the additions u/s 69 regarding unexplained investment were also deleted by learned CIT(A) on finding the same to be supporting with evidence and were part of the balance sheet of the assessee. Learned counsel for the assessee heavily placed reliance on the order of learned CIT(A) and in view of his arguments it was prayed that the order of learned CIT(A) be upheld.

4. We have heard the rival parties and have gone through the material placed on record. We find that vide revised grounds of appeal, the Department has challenged the admission of additional evidence under Rule 46A of the I.T. Rules. The grievance of the Department is that despite giving a number of opportunities, the assessee did not file complete evidences before the Assessing Officer and therefore, learned CIT(A) should not have admitted the additional evidence under Rule 46A. Regarding the deletion made by learned CIT(A) on account of unsecured loans, Learned D. R. invited our attention to the copy of remand report where the Assessing Officer had held that creditworthiness of the lender was not proved and similarly regarding the deletion of unexplained investments, the Assessing Officer during remand proceedings has again held that satisfactory explanation, about the nature and source of these investments, was not given. Learned D. R. argued that first of all the evidences should not have been admitted and if at all admitted, the learned CIT(A) should have considered the adverse remarks of the Assessing Officer. We find that learned CIT(A), at page 3 of his order, has categorically mentioned that he has verified the assessment record and has found that most of the evidences, filed by the assessee under Rule 46A, were already on the assessment records. The assessee, before the learned CIT(A), had prayed that because of a technical snag in the computer system, the assessee could not file the complete extract of books of account before the Assessing Officer and therefore, the application under Rule 46A of the I.T. Rules was filed. We find that learned CIT(A) has held that assessee was prevented by a reasonable cause in furnishing evidence before the Assessing Officer and most of these were already available in assessment records. In the facts and circumstances of the case, we find that the assessee was necessarily prevented by sufficient cause for not filing complete evidence before the Assessing Officer and therefore, learned CIT(A) has rightly admitted the additional evidence and in view of the above, ground no. 6 & 7 of the appeal are dismissed.

4.1 Now coming to the merits of the deletions, made by learned CIT(A), we find that Assessing Officer had made the addition on account of unexplained unsecured loans belonging to the following persons:

4.3 As regards the loan from Kusum Yadav, we find that Kusum Yadav had given an amount of Rs.14,60,000/- to the assessee on 24/01/2012 out of her bank balance. The lender had received cash gifts from relatives on the occasion of her 20th marriage anniversary in May, 2011 for which she had filed confirmations regarding giving of gifts to the lenders and learned CIT(A) has held that lender had sufficient bank balance in her bank account. As regards the amount of Rs.1,00,000/-, we find that learned CIT(A) has observed that such amount was credited to the account of the lender on account of adjustment with one creditor of the assessee Nikhil Pharma. The learned CIT(A) has observed that none of the evidences furnished by the assessee were disputed by the Assessing Officer during the assessment proceedings and we also observe that Assessing Officer, in the remand report, has not adversely commented on these evidences therefore, we are in agreement with the findings of learned CIT(A) by which he has deleted the additions.

4.4 As regards the unsecured loans from Ram Medical Agencies and RP Enterprises, we find that the assessee himself is proprietor in these two proprietorship firms and Assessing Officer observed during assessment proceedings that there was a credit balance of these proprietorship concerns in the books of the assessee which is a third proprietorship concern of the assessee. The learned CIT(A) has held that a corresponding debit balance also appeared in the name of Ram Medical Agencies which is again a proprietorship concern of the assessee. The learned CIT(A) has made a finding of fact that these amounts were verified from the individual and consolidated balance sheets of these concerns and these were already furnished to the Assessing Officer and assessee had also furnished inter copies of the accounts of the concerns reflecting detailed transactions among themselves. Therefore, we do not find any infirmity in the order of learned CIT(A) so far as regards the deletion of addition of Rs.1,80,000/- and Rs.52 lacs respectively are concerned. In view of the above, ground No. 1 of the appeal is dismissed.

(Order pronounced in the open court on 19/07/2022)

Sd/. Sd/. ( A. D. JAIN ) ( T. S. KAPOOR ) Vice President Accountant Member